The End of Arthur Andersen?

For Andersen, the Enron scandal may only get worse. A senior Administration official told TIME last week that an indictment of the Big Five accounting firm or some of its executives could be imminent. An adviser to the company, meanwhile, acknowledged that it was on the brink of serious financial trouble and suggested that an indictment might force it to seek protection under bankruptcy laws. This is vehemently denied by Andersen spokesman Charlie Leonard. "You can't [declare bankruptcy] if you're solvent," he says. "Andersen is solvent."

Nonetheless, some of Andersen's most prestigious and loyal clients — including pharmaceutical giant Merck, mortgage agency Freddie Mac and Delta Airlines — are canceling contracts. "There's such a drumbeat of departures that it may trigger a flow of clients they can't stop," says Richard Ossoff, publisher of Auditor-Trak, which follows the accounting industry. "The 'Big Four' is a potential outcome." This reality is not lost on Andersen's competitors. A senior employee at Deloitte & Touche says his firm is "going after Andersen companies dead-on."

In an effort to reassure clients, Andersen's partners fired the lead auditor on the Enron account, David Duncan, in January and admitted to Congress later in the month that potentially incriminating documents had been shredded. But suspicion that Andersen was not exactly forthright about the level of involvement of several executives was stoked by the revelation that Nancy Temple, a lawyer with the company, sent a memo reminding employees of Andersen's document-retention policies on Oct. 12. The memo, observers suspect, was a tacit order to start the shredding.

And now, to add a new twist to the scandal, plaintiffs' lawyers involved in the deposition of Duncan's former assistant Shannon Adlong told TIME last week that the shredding of documents actually began on Oct. 13 — 10 days before Andersen admitted it started and a day after Temple's memo. Adlong, who was responsible for ordering extra bags for the shredded papers, said so much evidence had to be destroyed that 32 "trunks," each the size of a football locker, were hauled off by a shredding company.